Market Overview

GOGO Q1 2014 Earnings Conference Call Highlights

The following comments, based off of an executive's transcript, are highlights from the Gogo (NASDAQ: GOGO) Q1 2014 earnings conference call.

Technology

  • When it comes to international aircraft, the recently announced 2Ku technology, which is exclusive to GOG, is the fastest solution in the market, offers the lowest cost of bandwidth as a best coverage and offers significant authorizational advantages for airlines.
  • 2Ku antenna is expected to deliver peak speeds of 70 megabits per second to the aircraft initially. It's the highest in the industry.
  • GTO and 2Ku are essentially the same technology. We purposely engineered GTO to leverage our ATG network, therefore GTO will only work over North America.
  • Development of both technologies remains unscheduled.
  • At the end of Q1, we had nearly 2,100 commercial aircraft in North America, 534 of those had ATG-4. We're well on our way to hitting our goal of 800 by the end of year.
  • ATG-4 triples the peak speed to the aircraft to 10 megabits per second.
  • Air Canada awarded their entire domestic fleet of 130 aircraft to us. As you know, they also have announced to trial both 2Ku and Global Xpress connectivity technologies on their international aircraft. We expect those trials to be done in 2015.
  • We're on target to meet our goal of having 50 to 100 aircraft flying outside of North America by the end of 2014.

The Numbers - Overall

  • Record revenue of $95.7 million for the quarter, up 35 percent percent versus the first quarter of last year.
  • Service revenue of $72.3 million, was up 32 percent, our equipment revenue of $23.4 million, was up 48 percent versus last year.
  • Our adjusted EBITDA of $5.3 million, was up 87 percent versus the first quarter of last year, despite a $10.7 million increase in our CA-Rest of World segment loss to $16.9 million this quarter.
  • For the quarter, free cash flow which we define as the sum of net cash used in operating and investing activities was a negative $45.4 million, decrease of $11.7 million from a negative $33.7 million from the first quarter of last year.

The Numbers - Commercial Aircraft (CA) North America

  • Revenue of $57.1 million was up 32 percent versus last year, driven by a 31 percent increase in connectivity revenue.
  • Our average monthly service revenue per aircraft (ARPA) reached nearly $200 a month, up 20 percent from last year. This indicates an annual run rate of over $110,000.
  • For the quarter CA North America cost of service declined to 48 percent of service revenue. This represents an improvement over 3 percentage points versus last year.
  • CA North America segment profit of $5.8 million for the quarter was up $6.2 million from the second loss of $0.4 million a year ago, an improvement of 11 percent in segment profit margin
  • We do expect overall operating expenses to decline, as a percent of revenue versus prior year.

The Numbers - Business Aircraft (BA)

  • BA had another record quarter. Revenue of $38.61 million was up 47percent versus the first quarter of last year. Service revenue was up 44 percent and the quarter revenue was up 49 percent.
  • We shipped 241 ATG systems and a number of ATG aircrafts online increased to 3,250. We also sold an additional 272 Text & Talk units starting the quarter, bringing the total to 824 since our product introduction in September 2013.
  • Given the high initial sales of Text & Talk, we do expect continued sales placed to be somewhat lower

The Numbers - Commercial Aircraft Rest-of-World

  • For the quarter, we generated just under $100,000 of revenues.
  • Our segment loss increased to $16.9 million, versus $10.7 million last year. The increase in segment loss was driven by a $1.2 million reduction in non-recurring revenue.

Posted-In: GogoEarnings News

 

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